It's the software stupid - something all companies big and small forget. They should have stayed with X86 from the beginning.
The PPC and CELL choices are made by hardware engineers that fall in love with speedy hardware specs, sell it to management and then throw it over the wall for the software community in the "other building"

Move away from IBM should be easily explained by IBM not installing enough wafer making capacity at 32nm and beyond. GF is IBM mfg partner. But they must have gotten a good deal from AMD , which also make chips at GF, using same tech as IBM.

How much should they actually care about backwards compatibility?
Yes, they could encourage developers to port older PS3 games, or try to do a software emulation layer.
But the people who would want to play the old games already have a PS3. They might get a PS4, but will the PS3 simply be thrown out/sold/passed along, or will it be kept around for older games while the PS4 gets used for new content?
Backwards compatibility may not be that critical, if the PS4's performance on new stuff is compelling enough.

Agree. IBM had designed the processors for all the 3 big game console providers and I suspect it was not able to provide a roadmap for them.
Reminds me of the decision by Apple to move away from IBM/Motorola to x86 for the same reason.

While I understand that switching to a different architecture could happen on the game console, I am not sure if the cost of the CPU/GPU is the only reasons that motivate game console guys to do so.
Considering the headache of dealing with backward compatibilty issues of their game titles, I don't think this is a decision that they take it lightly.

The game console folks have no loyalty to any specific architecture. Sony itself used MIPs, then moved to Cell and now x86. Xbox uses custom powerPC cores from IBM and may also move to x86 or ARM. Whoever gives them the lowest cost chip wins. In this instance AMD gave them the APU with both the CPU and more importantly the graphics processing.

Two big lessons that Sony has learned from launching PS3.
1) Time to market: Game console has become a congested market. The delay launching PS3 was a big deal for Sony to timely making the development cost of PS3.
2) Game availability and time to market: Cell processor was superior in many way. The graphic quality and performance were incomparable in the early time of PS3. With the same game available in both PS3 and XBox 360, the one on PS3 was so much better. However, gamers are willing to live with 720p with an early availability of the game. The development cost (time and developers) of PS3 game was known to be really pricy.
With all these experience, it is not difficult to understand the direction that Sony has taken. However, I think it is very important for Sony to understand why Microsoft has chosen PowerPC on XBox360 instead of continuing the direction of using X86 as in XBox.

In conjunction with unveiling of EE Times’ Silicon 60 list, journalist & Silicon 60 researcher Peter Clarke hosts a conversation on startups in the electronics industry. One of Silicon Valley's great contributions to the world has been the demonstration of how the application of entrepreneurship and venture capital to electronics and semiconductor hardware can create wealth with developments in semiconductors, displays, design automation, MEMS and across the breadth of hardware developments. But in recent years concerns have been raised that traditional venture capital has turned its back on hardware-related startups in favor of software and Internet applications and services. Panelists from incubators join Peter Clarke in debate.